Sustainability report and CSRD from 2024: What you need to know

To achieve the EU’s sustainability goals and steer the economy towards a more environmentally friendly and socially responsible direction, the European Union has decided to implement stricter standards for sustainability reporting. This aims to ensure more comprehensive and transparent reporting on companies’ environmental, social and governance (ESG) aspects. The Corporate Sustainability Reporting Directive (CSRD) is a central component of this initiative, striving to achieve the EU’s sustainability goals and guide the economy towards a greener, more socially responsible future.

Sustainability is growing in importance

Investors and consumers are increasingly prioritising sustainable practices and favour companies that are leaders in this field. The CSRD aims to ensure that companies report not only on their financial results but also on their impact on the environment and society.

CSRD and the Non-Financial Reporting Directive (NFRD)

The Corporate Sustainability Reporting Directive (CSRD) is a European Union initiative aimed at enhancing the transparency and consistency of corporate sustainability reporting. This directive expands on the existing requirements of the Non-Financial Reporting Directive (NFRD) and obliges a larger number of companies to disclose detailed information about their sustainability practices.

The CSRD is a key part of the EU’s strategy to promote a sustainable economy and meet climate goals.

Carbon footprint

A central aspect of the CSRD is the reporting on carbon emissions. Companies must disclose their greenhouse gas emissions, which plays a crucial role in assessing their environmental impact. This information is essential to evaluate companies’ progress in reducing their carbon footprint and ens uring they contribute to the EU’s climate targets.

Environmental, social and governance

In addition to environmental aspects, the CSRD also requires comprehensive reporting in the areas of social responsibility and governance. This means companies must provide information on their social practices and relationships, such as working conditions, etc.

In addition, they must report on corporate governance, including ethics policies, anti-corruption measures and risk management. This holistic approach ensures that all three aspects of ESG are included.

EU Taxonomy Regulation

The CSRD is also closely linked to the EU Taxonomy Regulation, a classification system defining which activities are considered environmentally sustainable. Reporting under the CSRD should ensure that companies provide information on how their activities align with the criteria of the EU taxonomy. This enables investors and other stakeholders to make informed decisions about the extent to which companies are genuinely operating sustainably and contributing to the green economy.

Double materiality

Implementing the CSRD requirements poses a significant challenge for companies but also offers an opportunity to enhance their sustainability practices. A central element is the principle of double materiality.

The principle of double materiality stipulates that companies must report not only how sustainability issues affect their operations but also how their operations impact the environment and society

European Sustainability Reporting Standards (ESRS)

To standardise compliance with the CSRD, the European Sustainability Reporting Standards (ESRS) are being developed. These standards aim to enable companies to collect and present relevant data consistently and comparably.

The ESRS cover a broad range of topics, including environmental, social and governance aspects, and are designed to meet CSRD requirements by providing clear guidelines and criteria for reporting.

Increased obligations for medium and large companies

Many companies that are of public interest (Public Interest Entities) will soon be required to produce sustainability reports. This includes public entities performing state functions. For LLCs (Limited Liability Companies) and PLCs (Public Limited Companies), the reporting obligation depends on specific criteria.

Companies employing more than 250 people, generating an annual net turnover of more than €40 million or with total assets exceeding €20 million fall under this regulation.
Below is an overview of the types of companies that need to start ESG reporting in the coming years under the EU regulations. These timelines ensure that different types of companies gradually become accountable for their ESG reporting, starting with the largest and most impactful entities.

Benefits of a sustainability report

Creating a sustainability report can offer numerous advantages, even for companies not covered by the Corporate Sustainability Reporting Directive (CSRD). For example, by enhancing transparency, a company can build trust with customers, investors and other stakeholders.

In an era where ethical and sustainable business practices are increasingly significant, such a report can also be a crucial competitive differentiator and strengthen a company’s market position. Sustainability reporting also encourages internal reflection on business practices, leading to more efficient and sustainable processes, supporting strategic planning and risk management. In the long term, it can result in cost savings and improved operational performance.

Want to learn more about the specific measures your company needs to take under the CSRD and how Microsoft solutions can greatly simplify report creation?

Contact us, we look forward to supporting you, together with our partner Terra Reporting.